Fisher Fund: AI is changing the world, but the big winner could be the provider of picks and shovels

opinion

ChatGPT is changing the world as we know it and some businesses are being affected. But what are the best investment options to take advantage of this new wave of technology-driven disruption?

Dan Rosenweig, CEO
Mr. Chegg, an online education company, recently painted a worrying picture for investors.

Chegg offers homework support, digital and physical textbook rentals, online tutoring, and other student services.

Speaking to analysts on the latest earnings call, he said the massive surge in student interest in ChatGPT has led to new customers for Chegg, as students are choosing to use AI tools to help them with their homework instead. He said it affects his ability to earn.

The announcement caused the stock to plummet, dropping 48% in a single day, casting a shadow over the company’s future.

While AI is still in its early stages, it has already caused repercussions across many industries, captivating the minds and imaginations of scientists, politicians and businesses, and pushing terms like ChatGPT to the forefront of public consciousness.

For many companies, this could be a boon that enables significant productivity gains, but some companies may face an existential risk to their business model.

new gold rush

Investors looking to capitalize on the AI ​​boom look no further than the 19th century gold rush to find the best investment strategies.

As in the riverbeds of California, Victoria and Otago in the 1800s, the best business was not sanding and mining for gold, but selling pickaxes and shovels for it to miners.

Levi Strauss and Jacob Davis were in the box then, but AI today is dominated by companies selling tools and services that support the growing AI industry. Amazon, Google, and Microsoft are well positioned to grab early leads and serve as the catalysts and backbones of the AI ​​revolution.

Many companies are already using AI for computational and quantitative tasks.

JPMorgan Chase and Mastercard are using AI to automate tasks like fraud detection and risk assessment, freeing up employees to focus on other things; Netflix is ​​improving its recommendation engine We are continuously developing new functions that utilize AI to

A recent big innovation is the wave of large scale language model (LLM) releases such as ChatGPT. LLM has moved AI beyond numerical and quantitative tasks to language, creative content creation, and replication of human interactions.

Productivity software offers great benefits.

For example, Microsoft’s coding platform, GitHub, has published an AI feature called Copilot that helps developers code by providing autocomplete style suggestions as they code.

People often talk about “10x super developers” who are 10x more productive than the average developer.

GitHub CEO Thomas Dohmke strongly believes that 10x developers will become ubiquitous.

Some business models could be upended by technology

Chegg is an early example of a company impacted by AI, and repetitive manual businesses can be impacted as well.

Industries that previously required people with specialized skills such as copywriting and website design can now complete these tasks in minutes instead of days or weeks with the help of AI. .

Instead of using a copywriter, you can enter simple prompts into Word Copilot to generate complete articles and content for publication and advertising. Simply take a photo of your handwritten website design and feed it into an AI model to build your website.

For these industries, this is not necessarily a negative if productivity gains can be used for more mundane tasks and more time spent on value-adding activities.

Satya Nadella, CEO of Microsoft, believes AI will enable “all developers to focus all their creativity on the big picture: building tomorrow’s innovations and accelerating human progress today.”

Cloud computing companies will be the biggest beneficiaries of AI.

AI requires a lot of computation. A single conversation with him on ChatGPT costs just a few cents, but with billions of people using it over and over again, this cost grows exponentially, and a day costs him $100. It is estimated to exceed 10,000 New Zealand dollars.

Temptation of Azure

Amazon AWS, Microsoft Azure, and Google Cloud Platform dominate the cloud computing market, and AI is greatly expanding its horizons.

Only a handful of companies have the scale and power to provide the computing infrastructure that will ultimately host AI applications. Both Amazon and Azure have invested heavily in building their own AI-specific chips to train and run AI models more efficiently. This is unlikely to be replicated by smaller competitors.

These three providers are well-positioned to capture the majority of AI workloads by either licensing their own AI models or offering computing power to host the AI ​​models of others. I have.

AI today is like the internet in the 90s before smartphones, app stores, streaming and social media grabbed most people’s attention.

Current commercial use is relatively small, but the use cases are endless. Investing in select ones like AWS, Azure, and Google Cloud Platform can maximize your chances of success, regardless of which platform or AI model predominates.

As in the early days of the Internet, we can only speculate on what the ultimate scale, impact and uses of AI will be, but what we do know is that businesses will adapt to harness the power of AI. You have to, or you risk being left behind.

– Daniel Moser is an investment analyst at Fisher Funds.

Disclaimer: The information and opinions provided herein are general in nature and are not intended as personal financial advice. We recommend that you seek appropriate advice from a qualified professional on a case-by-case basis.